FTC Prods Google, Yahoo To Better Clarify Search Ads

Google Maps, ads on social networks like Facebook and even — looking down the road — Apple's Siri voice assistant are all seen as catalysts for a Federal Trade Commission warning to search engines.

Search engines aren't doing a good enough job telling consumers when they're being served paid ads, a problem that is growing alongside skyrocketing mobile and targeted ads, the FTC said in letters sent late Tuesday to search engines.

"Regardless of the precise form search may take in the future, the long-standing principle of making advertising distinguishable from natural results will remain applicable" in mobile apps, social media and other platforms, Mary Engle, the FTC's associate director of advertising practices, wrote in the letter sent to the search firms .

Google Maps, which suggests nearby stores and restaurants and has some advertising built in, might draw scrutiny from the Federal Trade Commission. AP View Enlarged Image

This update to a similar 2002 letter was sent to Google (GOOG), Yahoo (YHOO), AOL (AOL), Microsoft (MSFT) and 20 other search engines. The FTC say it's seen a "decline in compliance" in keeping paid ads out of "natural" results.

The "guidance" letter in part stems from ads being more seamlessly integrated into content. The FTC doesn't mention any apps by name, but it warns that not clearly identifying ads on a social network like Facebook (FB) or on a "voice assistant" like Apple's (AAPL) Siri might violate the act that requires that consumers know when they're seeing an ad.

Google Maps, which suggests nearby stores and restaurants and has some advertising built in, might well be another program getting scrutiny, says Wedge Partners analyst Martin Pyykkonen. But people who use Maps don't usually care if what they're clicking on is a paid ad, as long as it's the best search result, he told IBD.

If a paid search result is the "best" search result "it's not a big deal for consumers," Pyykkonen said. "If the advertiser is willing to pay for the click, then that's a business decision."

In its letter, the FTC cites an April study by SeoBook.com that says only about half of consumers polled know whether a site has paid advertising.

Most of the FTC's five-page letter rehashes how search engines should display ads inside "shaded" boxes or accompanied by text indicating that it's an ad. The FTC "recommends" advertising be labeled in the "upper-left hand corner of an ad block," as websites usually are "viewed from left-center to right."

Ad Identifiers 'Less Visible'

Search engines have long agreed to use colored backgrounds, but those boxes are becoming "significantly less visible" at times, the FTC said.

The letter suggests search engines bulk up borders around ads so users of small-screen mobile devices can see them.

Several search firms told IBD they're reviewing the FTC letter, but none promised to make any changes.

"Clear labeling and disclosure of paid results is important," a Google representative said via email, "and we've always strived to do that as our products have evolved."

A Yahoo spokeswoman says the company is committed to "providing a clear and transparent search experience for users."

A Microsoft spokeswoman says the letter raises an "important issue" that the company is taking "very seriously."

DuckDuckGo CEO Gabriel Weinberg told IBD he doubts a review of the search firm's design will result in changes, saying ads are "clearly labeled."

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